Sep 30, 2011 3:26 PM

From Kindle to Fire: Why Amazon Needs to Go Global

Amazon's customers outside the US have good reason to be both excited and frustrated by its three new Kindle devices.

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Amazon's customers outside the U.S. have good reason to be both excited and frustrated by the company's three new Kindle devices.

The baseline $79 Kindle finally supports seven different interface languages and will be sold immediately in Canada, the UK, Germany and elsewhere. It's a bit more expensive — £89 ($139), 99 EUR ($133) and $109 Canadian ($104), if you're interested. However, the much-anticipated Kindle Fire tablet is U.S.-only, with no announced timeline for a global roll out. The same is true for the Kindle Touch.

It's a reminder that Amazon is still growing into its role as a maker of devices. The Kindle started with English-language books because that is where Amazon started, and where its biggest strength lies. Like most still-growing companies, it tests the waters with its core consumers first, and only gradually branches out into new markets — supporting new languages, geographies and media.

For Amazon, which has always been overwhelmingly focused on the U.S. and anglophone markets, the entry-level Kindle's modest international support is actually a huge improvement. Even a year ago, when the third-generation Kindle launched, it was an English-only device.

Even in non-digital retail, Amazon's global reach has been limited; the company is only now launching a Chinese-language bookstore, in tandem with a local bookseller. Building an international reputation takes time, partnerships and a lot of hard work.

It's even more difficult when you're not just selling a tablet computer, but a global media store. As Netflix has seen, it can be extraordinarily expensive (in time and money) to get global digital rights to movies and television, let alone navigate the vagaries of local law.

It's almost better to compare the media tablet market to the smartphone market. Both devices are heavily subsidized and depend on sometimes-contentious negotiations with local partners. Books, newspapers and magazines are, if anything, even more balkanized than video or wireless. Digital rights and international sales (i.e., from an Amazon store in one country to a customer in another) add even more knotty complications. State-to-state sales tax has nothing on this.

Still, unraveling those knots is crucial. Technology companies have to crack the global market in order to compete with companies like Apple and Microsoft, or get Apple- or Microsoft-like growth. If you look at how Apple became (by some measures) the biggest technology company in the world, the iPhone, iPad and Intel Macs are a huge part of that story, but largely because those products gave Apple a foothold in markets it wasn't truly competitive in before.

So Amazon Fire's temporary confinement to the U.S. is just one more reason it's unfair to compare the Fire with the iPad. The Fire simply doesn't stand a chance competing with the iPad or iPhone or iAnything in total number of sales unless and until as many people in as many countries have a chance to buy both.

This means that one or two quarters from now, when we can first compare sales of Apple's and Amazon's tablets, domestic sales may give us the best gauge of customer interest and excitement in both devices. But total global sales will give us a better picture of just how robust the growth in the tablet market continues to be, as well as who is truly on top. If it isn't Apple by a wide margin, I'll dance a jig.

Continue reading "From Kindle To Fire: Why Amazon Needs to Go Global…"

Just how big is the potential market for Kindle Fire (and the Amazon media and services they sell)? At Amazon's launch event, I interviewed Forrester analyst Sarah Rotman Epps, who's written extensively on both Amazon and the global technology market.

"Global is one of Amazon's biggest weaknesses relative to Apple," Epps told me. "The iPad is available in 64 countries, while the Kindle Fire is U.S.-only to start. ... We're estimating that 50 percent of iPad sales in 2011 will come from outside the U.S., and in 2012 it will be even more. So Amazon is leaving a lot on the table by not bringing this out as a global product."

In the U.S., Epps says, "it's the same consumers who are buying dedicated e-readers and tablets: high-income, highly educated, heavy media consumers." On one hand, this means most of these consumers don't choose between a Kindle and an iPad or a Kindle and a Kindle Fire, particularly as the price of Amazon's devices has come down: Many buy both. But on the other hand, it means that room for total customer growth isn't unlimited, even within the domestic market, regardless of how affordable these devices appear to be.

"There's only about a third of U.S. consumers that own any kind of connected entertainment device," Epps says, from smartphones to video game consoles. "So when we say, 'everyone will have one!' we don't really mean everyone. … This is the addressable market."

Epps has since posted more of her thoughts on her blog:

Amazon appears to be overcoming nearly all the weaknesses I foresaw in its product strategy:
Supply—Kindle VP Dave Limp says they’re making “millions,” which is good, because that’s how many we expect them to sell.
Channel— will be selling the Kindle Fire at its retail partners (Best Buy, Radio Shack) in addition to Amazon.com, which gets more than 80 million unique visitors per month in the U.S. alone.
Partnerships—In our most recent report we wrote that Amazon would need to overcome the challenges of co-branding with Google/Android — and they have, by not including any Google or Android branding whatsoever on the device. We think this is a good move if the goal is mass-market adoption.

But in her report, Epps adds this following qualifier, in bold: Amazon still lacks a convincing global strategy compared with Apple.

Amazon's other limit on total sales of the Fire is temporary: The device is being released later in 2011 than analysts had originally projected. In August, Epps wrote that Amazon could sell as many as five million tablets during this holiday season alone; now she's revising that figure to the low end of her original estimate, or three million copies. Even though Kindle Fire is less expensive and even with Amazon's manufacturing and shipping machines running at full speed, there just isn't enough time to make, sell and ship enough tablets between now and the end of the year.

If Kindle Fire truly gets hot, American customers will have to compete with global customers and resellers for scarce copies, even though Amazon doesn't have the rights to sell or stream its media to those other countries. That's the other problem with a domestic-only release: When your profits don't come from hardware, every device sold that doesn't translate into media sales is a loss.

This is also another advantage Apple had when its iPhone was widely bought in the U.S. and resold to other countries where it wasn't officially supported. Every single one of those contract-free sales still made Apple a lot of money even if it didn't net AT&T a subscriber. In this case, Amazon's loss-subsidized sale price of the Fire makes it like Apple and AT&T combined.

This is why Amazon needs to go global: The market for global media is tremendous, and Amazon has a terrific, low-cost device that can deliver all of it. It can use the U.S. as its testing ground and fortress, but it has to venture out into global media retail. The company has to be committed to that now; all that's left is putting all of the pieces in place first, so it can land gracefully rather than crash to Earth.

Steve Jobs famously said that his first job when he returned to Apple was to get his product teams to stop thinking that for Apple to win, Microsoft had to lose. That was never going to work, Jobs said, because "we weren't going to beat Microsoft." Instead, Jobs said, "we had to remember who Apple was."

Over the next ten years, Jobs turned Apple from "just" an alternative to Microsoft Windows in the PC market into a serious, independent retailer of both media and consumer electronics. Apple, too, was once mostly limited to the domestic consumer, education and design markets. Since the launch of the iPhone, most of Apple's growth has come from an explosion in its global reputation and reach.

I think Amazon's figured out that they don't have to beat the iPad to win. But if Amazon's Jeff Bezos wants to play with the biggest tech companies in the world — Apple, Google, Microsoft, IBM — he, like Apple's Jobs before him, has to figure out how to get serious about positioning all of his company's devices and services to address the global market. If and when he does, Amazon's Fire will spread in a hurry.